In January 2026, Taiwan and the United States formally signed the U.S.–Taiwan Reciprocal Trade Agreement, a pact that has recently reignited debate over the peanut industry. Upon the agreement’s implementation, tariffs on peanuts will immediately drop to zero. Although U.S. peanuts currently account for a minuscule share of imports, their competitive pricing means a zero-tariff environment could eventually pose a threat to domestic producers.
Furthermore, Taiwan has committed to waiving the Special Safeguards (SSG) mechanism—a protection secured during its 2002 accession to the World Trade Organization (WTO)—for 14 agricultural products, including peanuts. Designed as an emergency shield for agricultural goods, the SSG allows WTO members to impose temporary tariffs without a formal injury investigation when imports surge or prices plummet. By relinquishing this WTO-compliant trade tool, Taiwan will find its policy maneuvering space significantly constrained when responding to future market volatility.
However, the impact of liberalizing U.S. peanut imports extends beyond a single market. Approximately two-thirds of domestically produced peanuts in Taiwan are consumed directly, while the remaining third is channeled into processing for products like peanut butter—a supply chain that has long relied heavily on imported raw materials. Under this structure, a significant influx of U.S. peanuts could not only depress domestic prices but also deepen the processing sector’s reliance on imported inputs, thereby crowding out production space for domestic harvests.
Conversely, some domestic peanut butter manufacturers assert that while imported peanuts may be cheaper, domestically grown peanuts boast superior quality and flavor profiles that are exceedingly difficult to replace. They maintain that even if low-cost U.S. peanuts flood the market, they will persist in sourcing locally, ensuring that demand for domestic peanuts remains insulated.
Yet, a more pressing concern lies in the ensuing complications regarding Rules of Origin determinations. Taiwan’s current rules primarily rely on the “Substantial Transformation” standard, which evaluates whether a product has undergone a significant manufacturing process sufficient to alter its nature, purpose, or tariff classification. For instance, processing imported peanuts into peanut butter meets this threshold, allowing the final product to be labeled “Made in Taiwan.” Similarly, the process of shelling imported in-shell peanuts domestically qualifies as a substantial transformation, permitting the shelled peanuts to bear a domestic origin label.
From a consumer’s perspective, the understanding and valuation of “origin” are often more closely aligned with the source of the raw materials. When imported peanuts are processed and labeled as domestic products, they may technically comply with regulations but create a substantive cognitive dissonance, sparking concerns over goods that are “domestic in name but imported in reality.”
This is particularly problematic under the current regime, where peanut butter is only required to list its place of manufacture without mandating the disclosure of the peanuts’ origin. As long as imported peanuts undergo processing that satisfies the substantial transformation principle, they can be marketed as domestic. Against the backdrop of increasingly globalized supply chains, the limitations of this origin-determination standard are becoming glaringly apparent.
Indeed, the peanut conundrum is not an isolated incident but a microcosm of the deepening division of labor within global supply chains. The current trade system inherently permits enterprises to alter a product’s recognized origin legally through multinational production strategies. However, when origin labels fail to reflect the substantive source of a product, the trust deficit between institutional frameworks and the market widens. In the realms of agricultural products and processed foods—where raw material sourcing is inextricably linked to quality, safety, and consumer preference—a singular “place of manufacture” label is no longer sufficient to meet the demand for information transparency.
Given these realities, policymakers should first examine whether the current Rules of Origin can be revised. For example, Taiwan could adopt practices common in most Free Trade Agreements (FTAs), incorporating the source of raw materials as a critical criterion for determining food origin. Secondly, Taiwan could draw inspiration from the European Union and Japan by strengthening its labeling regime, making the disclosure of “raw material source” mandatory to enhance transparency.
Ultimately, the peanut debate highlights a broader question than the mere liberalization of a single agricultural commodity: it tests whether institutional designs can adequately respond to shifting supply chains and market expectations. Amid the ongoing trend of trade liberalization, striking a balance between facilitating commerce and safeguarding consumers’ right to know will remain a critical challenge for future policy.
Source: Da-Nien Liu (May 6, 2026). From Peanuts to Peanut Butter: A Reexamination of Trade Policy. Economic Daily News. https://money.udn.com/money/story/5629/9484036